Eric Holder talked about reviving the assault gun ban. But he’s meeting opposition from unexpected quarters.
Senate Majority Leader Harry Reid will join Speaker Nancy Pelosi (D-Calif.) in opposing any effort to revive the 1994 assault weapons ban, putting them on the opposite side of the Obama administration.
Reid spokesman Jim Manley said the Nevada Democrat will preserve his traditional pro-gun rights voting record.
“Senator Reid would oppose an effort (to) reinstate the ban if the Senate were to vote on it in the future,” Manley told The Hill in an e-mail late Thursday night.
There’s a pretty political explanation for the opposition.
A) gun bills are always losers for Democrats. It seems that Pelosi and Reid have finally figured out (at least in this case) that it is rather stupid to hand your opposition ammo (no pun intended).
B) unpopular legislation like this wastes time and goodwill. They have a much more ambitious plan to sell us down the river than piddling stuff like this, and they don’t want to be distracted by something that will be virtually ineffective the second it is signed into law (but put the pro-gun lobby front and center for a while).
A number of House Democrats lost their seats after being targeted by the National Rifle Association for voting for the 1994 ban.
And finally, it is a way to make sure the Obama administration knows that it is Congress they must coordinate these things with before they go shooting their mouths off. Eric Holder said, without such coordination, that he planned on trying to reinstate the assault weapons ban. Pelosi and Reid used the opportunity to send a message.
That said, be aware that Holder certainly appears to have an anti-gun agenda, or, at least, so it seems.
Barack Obama is about to submit his first budget to Congress.
Finally, because we’re also suffering from a deficit of trust, I am committed to restoring a sense of honesty and accountability to our budget. – President Barack Obama to a joint session of Congress, Feb 24, 2009
That’s the promise. The reality, as the Washington Post observes, isn’t quite in keeping with the promise:
President Obama’s spending plan is built on the assumption that lawmakers can resolve some hugely contentious issues — and it relies on a few well-worn budget tricks.
The tricks? The usual stuff – calling something what it isn’t and inflating future spending numbers to make the future real numbers appear to be “savings”. For instance:
And though Obama told Congress on Tuesday that his budget team has “already identified $2 trillion in savings” to help tame record budget deficits, about half of those “savings” are actually tax increases, administration officials said. A big chunk of the rest of the savings comes from measuring Obama’s plans against an unrealistic scenario in which the Iraq war continues to suck up $170 billion a year forever.
The tax increases, of course, include an increase in taxes on the top 2%. And further savings are based on pretending that the Bush administration planned on spending $170 billion (seems like a small number when compared to the numbers being thrown around these days, doesn’t it?) beyond 2011 when it planned on pulling the bulk of the troops out of the country.
“It’s a hollow number,” said Sen. Judd Gregg (R-N.H.), the senior Republican on the Senate Budget Committee, who recently withdrew as Obama’s nominee to head the Commerce Department. “You’re not getting savings if you’re assuming spending that isn’t actually going to occur.”
What accounts for the other major source of income?
But to pay for it, the president counts on a big infusion of cash from a politically controversial cap-and-trade system, which would force companies to buy allowances to exceed pollution limits.
The promise that energy costs are going to skyrocket seems one promise he’s bent on keeping. That of course will require more spending to offset the consequences (but don’t figure on being in on the subsidy, you probably won’t qualify). And then there’s the redistributionist “spread the wealth” bonus to be realized from cap-and-trade:
Obama also wants to use the money to cover the cost of extending his signature Making Work Pay tax credit, worth up to $800 a year for working families. That credit, which will cost $66 billion next year, was enacted in the stimulus package, but is set to expire at the end of 2010.
Cover the cost is a way of saying, making the program permanent.
Then there’s the deficit promise. Obama has set a goal of cutting the deficit in half by the end of his first term. As observers say, there’s absolutely nothing difficult about reaching that goal:
This year’s budget deficit is bloated by spending on the stimulus package and various financial-sector bailouts, expenses unlikely to be repeated in future years. The nonpartisan Congressional Budget Office recently predicted that the deficit could be halved by 2013 merely by winding down the war in Iraq and allowing some of the tax cuts enacted during the Bush administration to expire in 2011, as Obama has proposed. That alone would cut the deficit to $715 billion, according to the CBO.
Notice that final number, folks. That’s “half” of the deficit. In other words he’s going to be running a deficit north of $700 billion dollars and trying to convince you how well he’s done. In fact, all he’ll have done is add several trillions to the debt with several trillions more to come if reelected.
The era of big deficit financed government isn’t just back, it’s back on steroids sitting in a rocket sled pointed at economic hell.
The Washington Post tells us:
President Obama is proposing to begin a vast expansion of the U.S. health-care system by creating a $634 billion reserve fund over the next decade, launching an overhaul that most experts project will ultimately cost at least $1 trillion.
I put those words in bold so you would understand that even the WaPo considers his plan to be “a vast expansion”.
Now, a question for you – when is the last time you remember “experts” who projected anything to do with the cost of a government program coming anywhere close to the ultimate cost? Or overestimating the cost?
So what can we really expect the true “ultimate” cost to be? Well if history is any guide somewhere around 2 to 3 times what they’re “projecting.”
And how will he pay for this? Why the same way Medicare has – by shifting costs to patients with private insurance and letting them pick up the slack:
Obama aims to make a “very substantial down payment” toward universal coverage by trimming tax breaks for the wealthy[tax increases – ed.] and squeezing payments to insurers, hospitals, doctors and drug manufacturers, a senior administration official said yesterday.
Of course, understand that when the cost of your private health insurance benefit goes up because of all the “squeezing” (i.e. cost shifting) going on, your company will either cut benefits, raise your insurance premium or both. And you shouldn’t at all be surprised that if given the option of dropping health care insurance for a government run system or continuing to pay through the nose for a private one, your company takes the first option. That is also part of this plan, although unstated.
My first reaction to Pres. Obama’s speech last night was depression. Here were the Democrats giving the president standing O’s for completely converting the Republic into a social democracy. I mentioned that on Facebook, and one of my readers said it reminded him of Amidala’s line from Star Wars Episode III: “So this is how liberty ends…with thunderous applause.”
But on more careful review, I find that I am not, in fact, depressed over the long-term. Indeed, last night’s speech seems to me not to herald the beginning of a new era for big government and socialism, but rather the last gasp of a dying ideology.
We are, I think, at the cusp of a new era, but it isn’t the one that Pres. Obama and his acolytes in the Congress are thinking it is. Neither the Democrats nor the Republicans, it is clear, have any idea about what is happening. Very few people do. I am going to try and explain something very complicated, and do so very simply, and as briefly as I can. So, with the realization that all simplifications are inevitably wrong in some particular, let me explain.
“Ed’s dead, baby. Ed’s dead.”*
We stand now, I think, in a very historically similar position to the one described by Barbara Tuchman, in the beginning chapter of her monumental work on the outbreak of Word War I, The Guns of August:
So gorgeous was the spectacle on the May morning of 1910 when 9 kings rode in the funeral of Edward VII of England that the crowd, waiting in hushed and black-clad awe, could not keep back gasps of admiration. In scarlet and blue and green and purple, 3 by 3 the sovereigns rode though the palace gates, with plumed helmets, gold braid, crimson sashes, and jeweled orders flashing in the sun. After them came 5 heirs apparent, 40 more imperial or royal highnesses, 7 queens, and a scattering of special ambassadors from uncrowned countries. Together they represented 70 nations in the greatest assemblage of royalty and rank ever gathered in one place and, of its kind, the last. The muffled tongue of Big Ben tolled 9 by the clock as the cortege left the palace, but on history’s clock it was sunset, and the sun of the old world was setting in a dying blaze of splendor never to be seen again.
Four years later, the world order of 1815-1914 was drowned in fire and blood. The Age of Royalty was over, and the Age of Democracy had begun. I believe that Pres. Obama’s speech of last night may very well be the historical equivalent to Edward VII’s funeral.
Ever since it began in late 2007, a blog called Fabius Maximus has been arguing that we are watching the decline and fall–indeed, collapse–of our current economic and financial system. A précis of the argument can be found here, and a more comprehensive archive can be found here. Just as the black-clad crowds lining the streets of the capitol of the British Empire on the morning of May 20, 1910 might have found it inconceivable that their generation would witness the collapse of both the European geopolitical regime, and, ultimately, the British Empire itself, so it may be inconceivable to us that we are witnessing the collapse of the Post-WWII economic and political regime. But I believe it is nevertheless true.
“MONEY! Doesn’t it make you feel good just to say that, Jerry?”
Let me start by explaining what money is. Money is a medium of exchange, that is, it is an object of some kind that I can exchange for goods and service, rather than trying to barter with people to obtain what I need. It may consist of elaborately carved cowry shells, tiny beads painstakingly stitched to strips of leather, round pieces of metal with the image of guys named Julius or Claudius hammered into them, or little pieces of high-quality paper that say “Federal Reserve Note” on them.
But whatever it is, money has certain minimal characteristics. It must be convertible, i.e., if I do a job for you, I have to be willing to accept it as payment, and whoever I buy bread or clothes from has to be willing to accept it in exchange, too. It also has to be difficult to replicate, so that when I accept it, I am reasonably assured that it is the genuine article.
For nearly all of recorded history “money” has been synonymous with gold or silver. And right up till the late 18th century, it was more or les the perfect money. It was intrinsically valuable, in that raw silver or gold was as easily convertible as hammered or minted coins. It was also practically impossible to counterfeit, the best efforts of alchemist to convert dross into gold notwithstanding. It was also relatively rare, and it difficult to obtain new supplies of it without intensive–and extremely expensive–mining operations.
Additionally, there simply wasn’t much to buy. Most people grew their own food, produced their own clothes from flax or wool, and built their own houses by hand. Money was essentially a luxury, and it bought mainly luxury goods for fat cats. Kings could raise and equip armies with it. Merchants could buy nice clothes. But for the most part, money was a tool for use by the rich, and by the relatively few urban dwellers. And, as such, gold or silver was perfect for that level of economic activity.
By the 19th century, though, there were lots more things to buy, and lots more city dwellers, and that trend was increasing rapidly. Hard money became…problematic. The thing about having a hard currency based in gold or silver is that, at the end of the day, whether you run a fully convertible gold standard, or some sort of fractional reserve system, the size of the money supply is always constrained by the amount of gold or silver on hand.
If the economy takes off on a tear, it’s extremely difficult to expand the money supply to meet the demand. When the supply dries up, the economy just shudders to a quick stop, because nobody has enough spare money to fund more expansion. So the economy collapses until it reaches equilibrium with the available money supply, and the cycle starts again. Look at a chart of US economic activity in the 19th century and you see it’s a system of booms and busts, which were far steeper than any we’ve seen since the depression. So the fundamental problem with a gold standard is that it’s relatively inflexible when used by a vibrant, diverse economy. When everybody needs gold, and the demand is unpredictable, gold is very difficult to use unless you’re willing to live with severe booms and busts.
The Great Depression was the death knell for the gold-based world economic system. Those nations that jettisoned gold the fastest, recovered the most. Of course, WWII intervened in the depression, so it took a decade or so to get back to the business of commerce–as opposed to the business of building things to kill Nazis. But, by 1944, everyone–on the Allied side, at least–had recovered enough breathing room to meet at Bretton Woods, NH, and hammer out a new economic system.
What they came up with was a system of fiat currencies, all freely convertible in the FOREX market.
Now, governments could adjust their money supplies appropriately by printing more money or less of it, and taxing their populations more leniently or more severely, as needed. This is the system most of us have grown up with…and it’s dying.
It’s dying because of something innate in human nature that the gold standard was better equipped to deal with: the urge to loot the system.
It’s an urge that has always been there. Sometimes it has been the result of intentional government action to cheapen the currency. If you were, say, the king of Persia, you didn’t need to consult the priests of Ahura Mazda to know that if you changed from using 10 grams of gold per coin, to using only 9 grams per coin, you could stretch your gold supply by 10%. You could then take the extra gold, and buy yourself a nice hat. Or use the extra gold to make one. Whatever.
Of course, people would notice this pretty quickly, and items that used to cost 9 gold pieces would cost 10 pieces–inflation!–but because gold had an intrinsic value, the same weight of gold could be exchanged. It was still pernicious, of course, but because gold had an intrinsic value–and because the supply of gold was relatively inflexible–it wasn’t usually seriously pernicious.
Sometimes, the urge to loot the system has been done by private individuals, who figured out that if they shaved a bit off the edges of their gold pieces, they could accrue enough gold shavings to buy themselves a nice hat, too. This, by the way, is why when we began minting coins instead of hammering them out. They were minted with milled edges, making shaving attempts immediately obvious.
By the 19th century, the looting attempts became widespread, populist movements, like the “Free Silver” movement. At the time, gold was real money. If you took a bunch of gold to a Minting facility, the mint would return you an equal weight in gold coins–minus a nominal minting fee. After huge silver deposits were discovered at places like the Comstock Lode, populist agitation began for minting silver in the same way, at a ratio of 20 ounces of silver for 1 ounce of gold. The massive amount of silver floating around would, of course, have made this an extremely inflationary policy, and the farming and borrowing interests would have benefited by paying off bills for less than they had borrowed…enabling themselves to use the extra saving to buy a nice hat.
But during the First Age of Money, the looting was always constrained by the fact that gold had an intrinsic value, and that the supply of gold was inelastic. There were, therefore built-in constraints to the looting impulse.
When the Bretton Woods Agreement launched the Second Age of Money, it solved the problem of the inelasticity of the money supply, and enabled monetary authorities to fine-tune the money supply in response to economic activity. That was a good thing in the sense that it flattened–although did not eliminate–the business cycle fluctuations.
But the bad thing was that it completely removed any physical restraint on the money supply. It depended on governments and monetary authorities to exercise self-restraint, rather than impersonal, externally imposed constraints. The result has been 65 years of continually expanding credit, more or less constant inflation to a greater or lesser degree, and unrestrained spending and borrowing.
Governments–and their democratic (small “d”) constituencies quickly learned that they could loot the system. Social insurance, medical care, military expansion…whatever the Big Idea of the minute was, we could have it. And if we didn’t want to pay the taxes to the government to pay for it–and, mostly, we didn’t–we could simply borrow it. We could obtain a whole bunch of little green pieces of paper now in exchange for a promise we’d pay back more little green pieces of paper sometime in the future. In the meantime, we could buy all the hats we wanted!
But now, we are obligated to pay back various people about fifty trillion pieces of green paper. Unfortunately, the entire household worth of everyone in the country is worth about forty trillion pieces of green paper.
How can the current economic and financial system possibly be considered solvent at this point? How will re-expanding the cycle of debt re-invigorate it?
No, we’ve had our fun. We got to loot the system for 65 years. Now, the hat bill is coming due.
I suspect we’ll pay the hat bill the same way that Germany repaid their war reparations debt after WWI. “Hey, you remember that reparations bill for 3 billion marks that we’re supposed to pay next week? Yeah. I just wanted to let you know that we’ve sent that order off to the printers, this week, and we should have that printed up for you by Tuesday.”
The result was massive hyperinflation, the collapse of credit, and 5 years of compete economic stagnation, serious economic pain, severe unemployment…and the ability to start over in the mid-20s with a clean balance sheet. Clean enough, in fact, that by 1936 Germany had more or less completely emerged from the Great Depression, while the employment rate in the United States hovered at around 18%.
What Pres. Obama is proposing may result in nothing more than additional spending that helps bring about the collapse of the Post-WWII economic regime, while at the same time providing–temporarily–a social safety net that will provide some help as we pass through a difficult transitional period.
“I was there at the dawn of the Third Age of Mankind…”
OK. Maybe it’s not that grandiose, but I think we are seeing the dawn of the Third Age of Money.
No one in the government realizes how the economic world is changing. So their proposed solutions are likely to be exposed over time as ineffective and, perhaps even counter-productive. The credibility of governments around the world is now invested in staving off an economic collapse. When their failures become evident, and their “solutions” are exposed as fantasies, that credibility will collapse. Who will want to buy government bonds, or use worthless government money? Who will trust the governments who lead us into the economic abyss?
Unfortunately, rather that realizing that we are entering a transition, and trying to discover how to shepherd us through that transition, they are invested in preserving the dying system of government-regulated money supply and credit. And even if they realized that we were in a transitional period, they would still do nothing about it because it would require voluntarily releasing their power over the economy.
Governments have always been in charge of money; determining what money is, how it will be exchanged, how new money will be created, etc. In part, this is traditional, in that only government had the resources and ability to fund and oversee mining and exploration activities, regulate what legal tender consisted of, and all of the other monetary functions. There simply were no other large organizations in existence to perform those tasks.
It wasn’t until the 17th century that organizations began to emerge that could begin performing those tasks, and not until the 18th century that it became practical. Private money of various types began to sprout up everywhere. 18th-century America was, for a time, replete every decent-sized bank issuing its own currency based on deposits.
Eventually, the Federal government cracked down on that private money, not so much from jealousy of the government’s role as the issuer of currency, but because private banks suffered from the same tendency to loot the system, issuing more and more inflated currency until it was worthless, and they ended up wiping out their depositors in the collapse as their obligations came due. There were some solid money banks of course, but the spectacular failures of so many private currency attempts led the government to tax them so heavily that private currency issuance became uneconomic. Governments may not have been perfect, but the constraints of the gold system meant that they didn’t fail as completely and spectacularly as private banks did.
What was missing in private currency of the time, and what has been missing in the current post-WWII financial system is feedback. Yes, there is some, but it takes a long time to filter into the monetary authority, and is derived indirectly from statistics on economic activity, rather than by any sort of direct observation. The Fed raises interest rates today, for instance, and it takes around eight months to observe the indirect effects of the monetary policy change. This is why the role of the Fed, has often been described as steering a car by looking through the rear-view mirror. Based on seeing where you’ve been, you make decisions about where you must go. That may be a form a feedback, but it is so separated in time from the inputs that it’s an inherently unstable system.
By the same token, what killed depositors in banks that issued private money was a lack of feedback. It wasn’t possible to see that bankers were looting the system in time to withdraw your money.
We call this lack of feedback asymmetrical information. We’ve never been able to even approach the ability to have full information about what a bank or government is doing that may affect the money supply, or economic activity as a whole. We’ve never been able to see all sides of the story, as it were. So, we’ve had to more or less leave it in the hands of government, simply because governments have been the only organizations with the size and scope to reduce, even partially, the problem of feedback.
So, it seems pretty hopeless, doesn’t it? The financial world we’ve grown up with is collapsing under the sheer weight of looting. If governments can’t do it, and a return to the gold standard can’t do it, then where are we? At the edge of another dark age?
I foresee the rise of private money once again, and returning in such force as to negate the government’s role in the economy. In fact, the pieces for creating the Third Age of Money are already there.
The Internet will be the platform for the new money. But it’s just the platform; the communications media. The actual objects that make up the Third Age of Money will almost be located in cyberspace.
First, there is encryption. In the not-too-distant future, you will go online with a persona, i.e., an online identity with a unique, highly encrypted digital signature. No more logging in with different user names and passwords at 100 different web sites. Your persona will be uniquely identified as you through the use of 4096-bit or 8192-bit public key encryption. Your persona will be impossible to forge or duplicate. It will be unique. Your “bank” and your “money” will be similarly encrypted.
Second, is your ATM/debit card. It won’t be exactly the same, of course. It will be far more secure, probably through the use of biological identification systems to verify authorization, such as retinal scans. It will be linked directly to your persona’s bank account.
Third, is the ability of all the major banks and credit card companies to do online transactions, and to convert one system of private money to another at a publicly known exchange rate. So, you can pay directly to your account–or withdraw from it–in Discover Dollars, or MasterBucks, or Credit Suisse Francs. Or perhaps there might even be a universally acknowledged unit of currency–the “Credit”–that all the private companies agree to use.
But, the most important element of creating a reliable private money system that is resistant to looting the system is feedback. The reduction of asymmetrical information. And that exists, too. eBay has been using it for years. Indeed, in no small way, the system implemented by eBay may be a key element of our future.
Imagine a system where, every time I do business with your persona, I rate your reliability, and it doesn’t matter of the persona is an individual or a bank…or a government. Every day, millions of people who do transactions in MasterCard can rate the reliability and value of the MasterBucks system. Private companies like Standard and Poors or Moody’s would not only rate MasterBucks, but consumers would rate the reliability of S&P or Moody’s judgments.
And not only are the bank’s persona’s being rated, but your persona is as well, by every one who does business with it.
Put them all together and you have a secure form of private money that’s convertible, impossible to forge, and is subject to constant feedback about its value and performance. Does MasterBucks have too high a debt ratio or too much exposure to non-performing loans at MasterCard? No problem. It’s instantly convertible to Credit Suisse Franks. And the conversion rate lowers MasterBucks reliability ratings even more, signaling the company to correct its course, or lose its depositors.
Think of the implications this has for taxation, especially income taxation. Keep all your money in Credit Suisse Francs, say, and the US government will never even be able to see a record of your deposits or withdrawals. How will they track your income? And who will want to pay governments that failed to prevent the collapse for…well…anything? Who will accede to the demand for money by governments that repudiated their debts, and destroyed the life savings of millions?
I can foresee huge implications for the future that are very pro-liberty. In the long term. In the short term, though, if I’m right, and the current financial system is collapsing we will be in for a very rough decade or so. Very rough indeed.
*Apologies to Quentin Tarantino.
Perhaps you’ve heard about Joe Biden’s latest gaffe regarding his task of overseeing the Recovery Act:
How can the public know that the money is allocated correctly? That’s the question CBS’s Maggie Rodriguez asked.
“We’re going to put every bit of this transparently up on a website. You’re gonna know. You’ll be able to go on a website. Every single bit of this will be on a website,” he explained.
“You know, I’m embarrassed. Do you know the website number?” he asked looking offstage. “I should have it in front of me and I don’t. I’m actually embarrassed.”
He was able to get the website “number” from someone off camera.
“Recovery.gov. It’s Recovery.gov. It’s up and running,” he said with newfound confidence.
If that doesn’t inspire confidence, then maybe you should just go visit the “number” VP Joe suggested. Before you do, however, keep in mind that, from far to wide and low to high, the Obama administration has been touting not just the need for transparency,
Orzag said the two goals are to spend stimulus money “quickly” and “wisely,” adding, “We have to go beyond normal procedures to a higher level of transparency.”
But also on the determination and ability of the administration to deliver it:
“I [Pres. Obama] am also proud to announce the appointment of Earl Devaney as Chair of the Recovery Act Transparency and Accountability Board. For nearly a decade as Inspector General at the Interior Department, Earl has doggedly pursued waste, fraud and mismanagement, and Joe and I can’t think of a more tenacious and efficient guardian of the hard-earned tax dollars the American people have entrusted us to wisely invest.”
Apparently, the whole point of Recovery.gov is to show where your tax dollars are going, and what they are being spent on. So let’s have a gander.
On the front page, my eyes were immediately drawn to the large graph dominating the left side of the page:
Wow! According to that chart, the largest expenditure by far ($288 Billion) is going to tax relief. Heck it’s twice as much as the next category of State and Local Fiscal Relief which is only get a paltry $144 Billion. That’s fantastic news. I feel so bad now for thinking that the bill was nothing more than a huge wealth transfer and goodies giveaway. Tax relief is always a good idea when it comes to pulling ourselves out of a recession.
But wait? What’s that asterisk? I click on the chart and am taken to a lovely bubble graph that displays the same information. But with more bubbles, which are always nice. And bubble are transparent too, right?
Yep. There it is again, that $288 Billion in tax relief, dwarfing all the puny spending bubbles. Of course, being an intelligent person, I know that you have to add all of the spending bubbles together to see how they compare to the tax relief, but it’s strangely comforting to see that giant, transparent bubble named Tax Relief making all the other bubbles seem, somehow, insignificant.
Unfortunately, that asterisk is still there as well. I follow it down to the bottom of the page where, in tiny print, I see these words:
* Tax Relief – includes $15 B for Infrastructure and Science, $61 B for Protecting the Vulnerable, $25 B for Education and Training and $22 B for Energy, so total funds are $126 B for Infrastructure and Science, $142 B for Protecting the Vulnerable, $78 B for Education and Training, and $65 B for Energy.
I think my bubble has burst. But that’s how government works now I guess: making bubbles bigger than they ought to be.
First the Obama speech. My overall impression was that of a campaign speech. High flying rhetoric, intentions hidden in comfortable rhetoric that Americans find more acceptable than other and contradictions which were so evident that I’m surprised the media let them pass (ok, not really, but I thought I’d jab them a little). However, in reality, it was much more than that as I’ll cover a little further on. But, as usual, very well delivered.
The Jindal speech, on the other hand, suffered by comparison. And, in fact, it suffered badly. Whoever helped him put that together should have skipped the “folksy” stuff and gotten down to business. By the time he finally got to the point, I was slack jawed with stupification. Having just sat through a 45 minute Obama speech I wanted a quick “give it to me now” response. 5 minutes into the Jindal speech we still didn’t know where he was going with it. My guess is by that time, most people who had thought about watching him had thrown up their hands, hit the can and were raiding the liquor cabinet.
Back to the Obama speech. As I thought about it more I realized he’d very carefully hidden the intention of his administration and the Democrats to convert this country into a cradle to grave European-style socialist country. Seriously. It’s all in there, but you have to carefully pick it out. While he never came right out and said it, he sure hinted around the edges. Probably the closest he came to actually laying it out was this:
That is why it will be the goal of this administration to ensure that every child has access to a complete and competitive education –- from the day they are born to the day they begin a career.
The same basic message was given concerning health care. When speaking about the budget he made this statement:
It includes an historic commitment to comprehensive healthcare reform –- a down payment on the principle that we must have quality, affordable healthcare for every American.
Two things to note – he didn’t say “health insurance” for every American. He said “health care”. And he also seems to have backed off of not making this mandatory.
He hit it again when talking about the two largest entitlement programs we have:
To preserve our long-term fiscal health, we must also address the growing costs in Medicare and Social Security. Comprehensive healthcare reform is the best way to strengthen Medicare for years to come. And we must also begin a conversation on how to do the same for Social Security, while creating tax-free universal savings accounts for all Americans. [So those “savings accounts” of old W’s weren’t so bad after all, huh? – ed.]
And here is where one of the glaring contradictions comes out. While claiming that the government’s version of health care will be much more efficient and less costly than the private version, he contradicts himself when he says we must get the spiraling Medicare and Medicaid costs under control. I’ll remind you of what we were promised Medicare would cost when it began, and I’ll further remind you that the real cost ended up at least 6 times that amount. I’ll also remind you that each year, that program has about 60 billion in waste, fraud and abuse. One of the efficiencies Obama claims will bring cost down is the elimination of that waste, fraud and abuse. That promise is as old as politics and still unfulfilled.
Last night, during the liveblogging, when Obama got to the auto industry, and started throwing “we” around, I asked “who is the ‘we’ he keeps talking about? Of course when you read the passage, I’m sure you will be able to figure it out:
As for our auto industry, everyone recognizes that years of bad decision-making and a global recession have pushed our automakers to the brink. We should not, and will not, protect them from their own bad practices. But we are committed to the goal of a retooled, reimagined auto industry that can compete and win.
I bet “we” are. The question is, will the “we” who are known as the public be willing to buy these autos designed and “reimagined” by government?
And, of course, the populist Obama was present as well . That’s a very old and tired political trick which still manages to work unfortunately. A method of creating an emotional distraction while you propose things which are much worse:
This time, CEOs won’t be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet. Those days are over.
Just hearing a President of the United States say such a thing should send shivers up your spine. Instead it was one of the major applause lines of the night.
And this too should have caused those who love freedom to pause and understand the underlying promise of the words spoken:
A surplus became an excuse to transfer wealth to the wealthy instead of an opportunity to invest in our future. Regulations were gutted for the sake of a quick profit at the expense of a healthy market.
Transfer wealth to the wealthy? How by letting them keep more of their money? How is that a “transfer”? Well, it becomes a transfer if you believe it really isn’t theirs at all. And the spending spree the Democratic Congress and the Obama administration are embarking upon certainly makes that case. With the lie about “no earmarks” in the “stimulus” bill again given voice, and with a 410 billion omnibus spending bill with 9,000 earmarks and another trillion being thrown into the financial sector, not to mention the cost of health care “reform”, S-CHIP and the coming cap-and-trade system, there’s no question where the “transfer of wealth” will be going during the next 4 years is there?
Tonight’s speech by Barack Obama isn’t a true State of the Union, but it’s close enough. Republicans will even have a response given by Louisiana Gov. Bobby Jindal.
Live-blogging will begin tonight around 8:30pm or so, I hope you’ll join us.
According to Ezra Klein, the Obama administration intends to finagle universal health care coverage out of its budget proposal, including an individual mandate:
I’ve now been able to confirm with multiple senior administration sources that the health care proposal in Obama’s budget will have a mandate. Sort of.
Here’s how it will work, according to the officials I’ve spoken to. The budget’s health care section is not a detailed plan. Rather, it offers financing — though not all — and principles meant to guide the plan that Congress will author. The details will be decided by Congress in consultation with the administration.
One of those details is “universal” health care coverage.
Some of you may recall that Obama, while in campaign mode, consistently denied that he wanted to introduce mandates as part of his health care package. Paul Krugman cited that opposition as the major difference between Obama and Hillary Clinton:
Let’s talk about how the plans compare.
Both plans require that private insurers offer policies to everyone, regardless of medical history. Both also allow people to buy into government-offered insurance instead.
And both plans seek to make insurance affordable to lower-income Americans. The Clinton plan is, however, more explicit about affordability, promising to limit insurance costs as a percentage of family income. And it also seems to include more funds for subsidies.
But the big difference is mandates: the Clinton plan requires that everyone have insurance; the Obama plan doesn’t.
Mr. Obama claims that people will buy insurance if it becomes affordable. Unfortunately, the evidence says otherwise.
Now that he’s been elected it’s presto hope’n change-o, and voila! Mandates!
Ezra Klein notes that the difference between the pre- and post-election plans is based on one word in the budget — “universal”:
That word is important: The Obama campaign’s health care plan was not a universal health care plan. It was close to it. It subsidized coverage for millions of Americans and strengthened the employer-based system. The goal, as Obama described it, was to make coverage “affordable” and “available” to all Americans.
But it did not make coverage universal. Affordability can be achieved through subsidies. But without a mandate for individuals to purchase coverage or for the government to give it to them, there was no mechanism for universal coverage. It could get close, but estimates were that around 15 million Americans would remain uninsured. As Jon Cohn wrote at the time, “without a mandate, a substantial portion of Americans [will] remain uninsured.”
In essence, unless everyone is forced to buy insurance, there is no “universality,” and the benefits of large participation in the insurance pool cannot be realized. An even shorter version is, if healthier people opt out, then sicker people can’t sponge off them.
The budget — and I was cautioned that the wording “is changing hourly” — will direct Congress to “aim for universality.” That is a bolder goal than simple affordability, which can be achieved, at least in theory, through subsidies. Universality means everyone has coverage, not just the ability to access it. And that requires a mechanism to ensure that they seek it.
Administration officials have been very clear on what the inclusion of “universality” is meant to communicate to Congress. As one senior member of the health team said to me, “[The plan] will cover everybody. And I don’t see how you cover everybody without an individual mandate.” That language almost precisely echoes what Senate Finance Chairman Max Baucus said in an interview last summer. “I don’t see how you can get meaningful universal coverage without a mandate,” he told me. Last fall, he included an individual mandate in the first draft of his health care plan.
The administration’s strategy brings them into alignment with senators like Max Baucus. Though they’re not proposing an individual mandate in the budget, they are asking Congress to fulfill an objective that they expect will result in Congress proposing an individual mandate. And despite the controversy over the individual mandate in the campaign, they will support it. That, after all, is how you cover everybody.
So it looks like you better start scarfing down those cheeseburgers, eating transfats, smoking cigarettes, or whatever it is you do that’s not considered healthy, because once the federal government pays for health care (which is what individual mandates essentially works out to), then it also has the power to determine what “healthy” means. After all, since everyone will be pulling from the same health care pot, and since each claim on that pot diminishes what someone else can get, then each claim must be a legitimate one as weighed against all the competing interests. Because the viability of the system depends on healthy people making much fewer claims than sick people against the collective health care resources, the government now has a vested interest in making people healthier, whether they like it or not.
Another way to put it is that we will have entered a Pareto optimal world where no one can change their position for the better (i.e. receive more of the pooled benefits) without hurting someone else. Whereas in a competitive market system, each person can get at least as much health care as he or she wants to buy and can afford, in a Pareto optimal world, we are competing for the same scarce resources (health care dollars), and our claims are granted based on a a third party’s (the government’) determination of worthiness. No longer can we get what we can afford, we get a predetermined portion of what the government decides to pay for. That, of course, is why there are 6+ month waiting lists for routine health care in places like Canada and the UK.
Possibly the most depressing result of yoking America with universal health care, is that we can pretty much kiss medical and pharmaceutical innovation good bye.
Government run health centralizes the risks of exploring new technologies, medicines, techniques, etc. Centralized risk translates into (i) observing a very cautious approach to advances, and (ii) the politicization of research … From a purely capitalist point of view, opportunites that might have been pursued otherwise, are foregone since those who accept the risks of pursuing them do not get to maximize their reward, so instead those advances must come from the government. With government as the sole innovator, there are now two types of risk (1) the risk of failure (i.e. spending gobs of money on something that does not deliver as promised, or that costs significantly more than the benefit), and (2) the political risks (i.e. what politicians face for advocating spending on projects that either fail or that don’t disproportionately benefit favored voters). The result is that risk is increased overall, and fewer innovations are realized.
America is pretty much the last industrialized nation to still have a (semi) private health care system, which should be understood to include the pharmaceutical industry (as a supplier of that health care system). What would happen to the growth and advances we’ve realized over the past few decades if (when?) we adopt universal health care? Where will the innovation come from? Who will take the risks? Without the proper incentives, and indeed with some of the worst possible incentives as the only driving force to creation, I fear that the scientific and medical Atlas will shrug.
I don’t mean to say that there will be no breakthroughs ever again, but the pace will be slowed dramatically. That’s because, one the government is in charge of paying for health care, it will also be in charge of paying for medicines. As we’ve already seen around the world, drug companies will be forced to sell their wares for much less than the (legal) monopoly prices they charge now. The result, therefore, will be much less risky and expensive research into new drugs that may never come to market, and much more emphasis on improving old drugs so as to continue to pay for further research.
Surely the federal government will pony up money for research into some diseases. But then the government will be in charge of picking winners and losers when it comes to whose diseases will get cures and whose won’t. To imagine what this would look like, just think back to how AIDS and breast cancer research dollars were successfully lobbied for, despite neither affecting anywhere near as many people as other deadly diseases.
In the end we will be left with less individual freedom, worse health care, and fewer prospects for any improvement in either. That is not the change I was hoping for.
UPDATE: Tom Maguire helpfully reminds us of how the health care debate progressed during the Democratic primary season:
For folks whose memories have blessedly erased any recollection of the endless Democratic candidates debates, let me toss in a brief reminder. Obama claimed that he would offer health insurance subsidies so generous that most folks would volunteer to sign up. Hillary mocked that, insisting that the young and healthy would decline to subsidize the rest of us, especially since they could not subsequently be denied coverage on the basis of pre-existing conditions; her plan included a mandate obliging everyone to buy health insurance, like it or not (as in Massachusetts). Hillary then diligently ducked the “or else” question of what penalties she would inflict on the young, helathy and recalcitrant who would prefer to hold off on buying insurance until they were sick. As a nostalgia piece here is a link to a lefty wondering why his party was so committed to forcing young, healthy members of the working class to subsidize the rest of us on health care; that seems like a good question but I am long resigned to not being smart enough to be a lefty.
Aww, Tom. You’re plenty smart enough. Just not angry, bitter or jealous enough.
As for the “or else” question, Obama and the Congress won’t be able to duck that one. I can only imagine what sort of sword they intend to dangle of recalcitrant ,
comrades citizens who refuse to sign up for the program.
No doubt this will somehow end up being blamed on “global warming”:
A rocket carrying a NASA global warming satellite has landed in the ocean near Antarctica after an early morning launch failure.
The mishap occurred Tuesday after the Taurus XL rocket carrying the Orbiting Carbon Observatory blasted off into the pre-dawn sky from California’s Vandenberg Air Force Base.
“Orbiting Carbon Observatory”? It is apparently now the “Submerged Carbon Observatory”.
In other climate change news, it seems the new “Climate Czar” is ready to rock and roll on the question of carbon regulation:
President Barack Obama’s climate czar said Sunday the Environmental Protection Agency will soon issue a rule on the regulation of carbon dioxide, finding that it represents a danger to the public.
The White House is pressing Congress to draft and pass legislation that would cut greenhouse gases by 80% of 1990 levels by 2050, threatening to use authority under the Clean Air Act if legislators don’t move fast enough or create strong enough provisions.
Note that last line – certainly what one would expect an unelected “czar” to do, wouldn’t you say? Note also that the EPA intends to declare CO2 a “danger to the public”. Yes friends, the gas you exhale as a part of your respiration, the one that plants use in photosynthesis, is suddenly going to be a “danger to the public”.
Officially recognizing that carbon dioxide is a danger to the public would trigger regulation of the greenhouse gas emissions from coal-fired power plants, refineries, chemical plants, cement firms, vehicles and any other emitting sectors across the economy.
All those economic sectors and industries which are supposedly going to be engaged in our recovery via infrastructure improvement, providing critical power and fuel or on the list to be rescued by bailout funds. Does that make any sense at all?
Critics of putting an expensive premium on carbon say that such a schedule may be overly optimistic given the global financial crisis and the ramifications that putting a cap on greenhouse gases would have across nearly every sector of the economy. Tough action too fast, they say, not only could curb manufacturing and create an energy crisis by halting new power plant construction, but also could force a rapid migration of businesses overseas to cheaper energy climes.
But zealots don’t really care about such things – I mean, this is about “saving the planet” you know? And this isn’t just about Browner. She has some powerful backing:
Specifically, Obama wants an economy-wide law – instead of just some major emitting sectors – and to auction off 100% of the emission credits, which analysts say could exponentially increase the cost of emitting, as well as the pay-off for low-carbon projects.
So, given this, does anyone still doubt that we’re going to be in this recession for quite some time once the Czar throws the lever on this little power play (no pun intended)?
Wait, there’s more. If you’re at all concerned with the expanded power this gives the federal government, you ain’t seen nothin’ yet:
Separately, Browner said the administration was also going to create an inter- agency task force to site a new national electricity transmission grid to meet both growing demand and the President’s planned renewable energy expansion. Siting has been a major bottleneck to renewable growth, and lawmakers and administration officials have said they’re likely to seek greater federal powers that would give expanded eminent domain authorities.
Hope and change.
Chrysler said the only reason it was back asking for more money so soon was that the car market was worse than it had expected two months ago.
This cavalier approach to the public purse raises a very big question. If Chrysler is really on track for a turnaround and all it needs is some financing to get over a bad patch in sales and debt markets, why doesn’t Cerberus Capital Management, which owns 80 percent of the company, put up the money itself? Why should taxpayers have to take the risk? That’s what private equity funds like Cerberus are supposed to do.
Cerberus and Daimler, which retained a stake in Chrysler, have promised to convert $2 billion in loans to Chrysler into equity, which should help reduce its debt. But Cerberus said giving fresh money would violate its fiduciary duty to investors, breaking company rules limiting how much it can commit to any given investment.
We suspect these rules would be more pliant if Cerberus deemed Chrysler to be a good deal.
It seems the secretive private-equity fund is willing to gamble on Chrysler’s survival with the taxpayer’s dime, but not its own.
The real question is, if it is violative of Cerberus management’s fiduciary duty to bail out its own company, why is it fiscally responsible for the federal government to do so?
And what does it say when the leader of liberal opinion has more qualms about a bailout than the federal government? Nothing good I would think.